Nashville approves sales tax increase for downtown district

Visitors to downtown Nashville's business district will be paying more in sales tax, starting July 1. The increase in the sales tax rate – to 9.75% from 9.5% – is expected to generate $2.4 million annually. The money collected from the increased rate can be spent only on specific purposes, mainly cleanliness and increased security in Nashville’s Central Business Improvement District. 

“We’re looking at the resurgence of the tourist economy in downtown,” Nashville Metro Council Member Freddie O’Connell said Tuesday while presenting the tax-increase resolution before it passed.

“It has overwhelmed some of the capacity of that area. This would create a dedicated funding stream for cleanup, some social services.” Nashville Downtown President and CEO Tom Turner said businesses in the district were in favor of the sales tax increase. 

“There is widespread business and merchant support for this resolution; they’re essentially willing to tax themselves to guarantee access to resources that are necessary to successfully run a downtown business,” said Turner, whose nonprofit organization bills itself as a downtown leadership organization.

“This is essentially the equivalent of 2 cents on each $8 burger, or other similar item, sold downtown.”

The tax rate increase first had to be approved by the Tennessee Legislature and signed by the governor before Nashville’s Metro Council could pass its own resolution. Gov. Bill Lee signed Senate Bill 424 into law May 18. 

“There are challenges any time you have streets that are used as much as that area of the city is. … That district may have thousands of people who are eating, drinking, entertaining themselves and spending money at those businesses,” bill sponsor Sen. Jeff Yarbro, D-Nashville, said. “It takes a toll on that area.” 

The new tax money will be managed by the Nashville District Management Corporation. A six-member committee of business owners will advise the corporation board on the best uses for the money.

O’Connell said during council discussion it is unlikely the money will be able to be used for overtime for the Metro Nashville Police Department, but a large portion of the money will be used for trash services and security. Both Yarbro and O’Connell have mentioned the Christmas Day bombing in downtown Nashville as a reason the area is in need of enhanced security. 

“This became a really important issue, especially after we had the tornado pass through Nashville as well as we had the Christmas Day bombing, and we realized it was important to make sure that we keep our downtown safe and clean,” said Rep. Jason Powell, D-Nashville, who sponsored the bill in the House. 

There are several exclusions to the sales tax, including professional services, lodging for transients, tickets to live events or ticketed sporting events, alcohol already subject to the liquor-by-the-drink tax, newspapers or publications and overnight or long-term parking. 

“That fee will be used for two precise purposes: incentivizing those tourist events and enhancing the public safety and cleanliness of that space,” Yarbro said.

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